• Notification Date: 24-01-2023
• Notification No: N/A

CAM Charges Subject to 2% TDS u/s 194C of Income Tax Act

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the common area maintenance charges would be subjected to 2% of Tax Deducted at Source (TDS) under Section 194-C of the Income Tax Act, 1961. A TDS survey had been carried out in the case of Ambience Group on two malls namely, Ambience, Gurgaon and Ambience Mall, Vasant Kunj. The survey revealed that mall owners had collected expenses in the form of common area maintenance charges on which TDS deduction had been carried out at 2% by the payers under Section 194-C of the Income Tax Act 1961 as against 10% deductible under Section 194-I of the Act.  

Consequently, the Assessing Officer passed an order under Section 201(1)/201(1A) of the Act towards short deduction of tax at source treating the assessee Devyani International Limited as default who was the diductor. Section 194-C deals with TDS deduction in the course of contract or subcontract works. Rajat Jain, on behalf of assessee contended that the deduction rate applicable on common area maintenance charges (CAM) charges, at the rate of 2% under Section 194-C had been rightly deducted. He further submitted that the CAM charges had been paid to a separate entity namely, Ambience Facilities Management Pvt. Ltd. 

Kumar Pranav, on behalf of revenue, contented that the CAM charges payable by the assessees were essentially part of rent payment and also susceptible to higher TDS rates of 10% as attributable to Section 194-I of the Act The Bench of Chandra Mohan Garg, (Judicial Member) and Shri Pradip Kumar Kedia, (Accountant Member) held that the action of the assessee for deduction of TDS at 2% of CAM charges under Section 194-C could not be faulted per se and assessee could not be regarded as assessee in default under Section 201(1)/201(1A) of the Act. The bench allowed the appeal observing that the common area maintenance charges were not forming the part of the actual rent paid to the owner by the assessee company as a separate agreement was between the Owner, Tenant and service provider for common area maintenance.